New Safe Harbors Offer Opportunities for Innovative Arrangements, Including Digital Health

*This is the tenth article in a series analyzing recent updates to the Stark Law and Anti-Kickback Statute and their effects on health care providers. To request a copy of the entire series, click here.

As part of its recent updates to the Anti-Kickback Statute (AKS) rules (the Final Rule), the US Department of Health and Human Services’ Office of the Inspector General (OIG) issued several new regulatory safe harbors aimed at facilitating the shift to value-based care. These new safe harbors protect care coordination arrangements and arrangements promoting patient engagement and support (the Safe Harbors). Both of the Safe Harbors offer expanded opportunities for providers interested in entering into innovative arrangements, including arrangements aimed at increasing the use of digital health and telehealth. However, due to their complexities and limitations, providers contemplating such arrangements should carefully assess the applicable Safe Harbor requirements to ensure their arrangements are indeed “safe” from a compliance standpoint.

The Safe Harbors

While each of the Safe Harbors may be used to protect digital health arrangements, the purpose of the arrangement and the type of remuneration involved dictates which Safe Harbor applies to the arrangement. For instances where the arrangement involves the provision of remuneration between providers (for example, provision of equipment to assist in monitoring a patient population), the Care Coordination Safe Harbor may be applicable. In instances where the arrangement involves the provision of remuneration to a patient (for example, provision of a device or software to help ensure patient compliance with a medication regimen), the Patient Engagement Tools and Support Safe Harbor (Patient Engagement Safe Harbor) could apply.

Care Coordination Safe Harbor

The Care Coordination Safe Harbor is the most flexible of the value-based care arrangement safe harbors created by the Final Rule, as it does not require the arrangement or its participants to assume any level of financial risk. (A detailed description of the safe harbors protecting value-based arrangements where the participant assumes some level of financial risk, as well as an analysis of the requirements generally applicable to all value-based safe harbors can be found here) Instead, the Care Coordination Safe Harbor is intended to facilitate arrangements aimed at improving quality, health outcomes, and efficiency regardless of financial risk assumed by a participant and permits the exchange of in-kind remuneration (excluding cash and gift-cards) among value-based enterprise (VBE) participants (VBE participants) for coordinating and managing patient care activities.

The Care Coordination Safe Harbor generally requires:

• The remuneration, for example, the digital health device, to be predominantly used to engage in activities directly connected to the coordination of care and management of care for the population targeted by the value-based arrangement (the remuneration should not result in more than incidental benefits to patients outside of the target population);
• The arrangement does not induce the furnishing of medically unnecessary items or services or reduces or otherwise limits medically necessary items or services;
• The arrangement not limit the provider’s (VBE participant’s) ability to make decisions in the best interests of the patients;
• The arrangement not require a provider to direct referrals to another provider if the patient expresses a preference for a different provider, the patient’s payor determines the provider, or directing such referral would otherwise conflict with applicable laws governing Medicare and Medicaid participation;
• The remuneration not be used to market items or services furnished by the VBE or its participants to patients or for patient recruitment activities;
• The arrangement must be commercially reasonable as with all value-based arrangements;
• Documentation describes: (1) the VBE and how the VBE participants will meet the VBE’s value-based purposes; (2) the identified target population using legitimate and verifiable criteria prior to the commencement of the arrangement; (3) the specific arrangement(s), also including descriptions of the purposes of the activities covered by the arrangement(s), the specific activities to be undertaken by the parties, the term, the target population, the cost of the remuneration - either the offeror’s cost and the methodology used to determine that cost or the fair market value of the remuneration, the recipient’s contribution (percentage and amount), and the outcome or process measures used to determine the recipient’s achievements in meeting the measures; and
• The offeror not take into account the volume or value of, or condition an offer of remuneration on, referrals of non-target population patients or business not covered by the arrangement.

To meet the Care Coordination Safe Harbor requirements, the recipient of the remuneration must also pay at least 15% of the offeror’s cost for the in-kind remuneration either prior to receiving the remuneration for one-time costs or at reasonable regular intervals for ongoing costs. Additionally, the VBE must monitor and assess the arrangement to determine whether the parties are achieving expected outcomes on an annual basis or at least once during the term of the arrangement. If the VBE determines that an arrangement resulted in material deficiencies of quality of care or that the arrangement is unlikely to further the coordination or management of care for the target population, the parties to the arrangement must, within 60 days, either terminate the arrangement or develop and implement a corrective action plan to remedy the deficiencies.

In general, the Care Coordination Safe Harbor prohibits the following entities from participating as VBE participants and utilizing the protections of the Safe Harbor:

• Pharmaceutical manufacturers, distributors, or wholesalers;
• Pharmacy benefit managers;
• Laboratories;
• Compounding pharmacies;
• Device manufacturers;
• DMEPOS companies; and
• Medical device distributors and wholesalers.

As a result, many types of providers and suppliers who otherwise may be interested in providing digital health technologies or other in-kind remuneration to hospitals, physicians, or other practitioners as part of a value-based arrangement are precluded from doing so under the Care Coordination Safe Harbor. These entities could instead avail themselves of other safe harbor protections, however, most other safe harbors require fair market value compensation in exchange for the provision of items or services, including digital health technologies.

The Safe Harbor includes a pathway allowing device manufacturers that are not physician-owned and DMEPOS companies to exchange digital health technologies under the Safe Harbor as “limited technology participants” to the VBE. The OIG broadly defines “digital health technologies” to include “hardware, software, or services that electronically capture, transmit, aggregate, or analyze data and that are used for the purpose of coordinating and managing care.” The term also includes “any internet or other connectivity service that is necessary and used to enable the operation of the item or service for that purpose.” Thus, the arrangement could include subsidization of internet costs associated with the VBE arrangement provided the technology is “predominantly used” for the value-based activities as required by the Safe Harbor.

In addition to fulfilling the requirements listed above, limited technology participants cannot condition the exchange of the digital health technology on the recipient’s exclusive use or minimum purchase of any items or services manufactured, distributed, or sold by the limited technology participant.

Providers who are considering availing themselves of the Care Coordination Safe Harbor should consider the following:

Each stream of remuneration under the VBE must separately meet the requirements of the Safe Harbor. 

• The OIG stated that if there is an enforcement action around a VBE, the government likely will analyze each arrangement with a remuneration stream separately but also consider the “totality of the arrangement” to assess potential AKS liability. Because VBEs are likely to include numerous arrangements and because the documentation requirements for the Care Coordination Safe Harbor are significant, it is important that providers entering into VBEs and utilizing the Safe Harbor maintain sufficient record-keeping processes to document and track each applicable arrangement.

• The remuneration exchanged under the Care Coordination Safe Harbor must be predominantly used to engage in the value-based activities for the target population. Where the remuneration is, for example, a health information technology tool, the parties to the arrangement must carefully assess whether the tool meets the “predominant use” requirement. For example, a tool that enables both remote patient monitoring and two-way telehealth interactions could satisfy the requirement if the technology is used by the recipient to coordinate and manage care for the target population. However, if the tool also incorporated functions related to billing and collection of the services provided to the target population for purposes of the provider’s financial operations, the tool likely would not meet the predominant use standard, and thus, the arrangement would not meet the Safe Harbor requirements. If the financial tool could be disabled, or the recipient otherwise paid fair market value for the financial tool, the arrangement may still meet the predominant use requirement. Regardless, the parties must carefully assess these concerns prior to availing themselves of the Care Coordination Safe Harbor.

Hospitals and other health care facilities interested in expanding the use of telehealth or digital health services in their service area, but who have had issues garnering interest from practitioners due to the costs associated with implementation of such programs, should consider whether the Care Coordination Safe Harbor will enable them to provide in-kind support to practitioners to expand their digital health programs as part of their value-based efforts. While the Safe Harbor has stringent requirements, it would allow the hospital or other facility to significantly offset the costs of program implementation for the practitioners, incentivizing practitioner involvement. And all parties involved in the arrangement will be well-positioned to take advantage of future shifts in reimbursement to value-based payments, having already established at least one value-based program.

Patient Engagement and Support Safe Harbor

For providers that are interested in providing in-kind tools and support to patients, including digital health technology, the Patient Engagement Safe Harbor offers a new means of protecting arrangements that promote population health. While the Safe Harbor does not contain the same stringent requirements as the other value-based care safe harbors, including the Care Coordination Safe Harbor, use of the Patient Engagement Safe Harbor requires the provider to be an eligible VBE participant. (A summary of the requirements for an eligible VBE participant can be found here) Thus, the Safe Harbor is not open for general use by all providers.

For eligible providers, the Patient Engagement Safe Harbor permits the provider to give patients in a target population technology, tools, and support valued at up to $500 annually to achieve identified health goals. The goals include adherence to a treatment or drug regimen, adherence to a follow-up care plan, prevention or management of a disease, or to ensure the patient’s safety.

The tools and support permitted under the Safe Harbor must be: (1) related to care coordination and management, (2) recommended by a licensed practitioner, and (3) used to meet one of the identifiable health goals. The tools and support may include:

• Provision of in-kind transportation (for example, transit vouchers or ride shares organized by the VBE);
• Home modifications such as grab bars or air filters or purifiers, and other physical or structural modifications allowing the patient to live safely at home;
• Temporary housing for patients experiencing homelessness or for patients who are post-surgical discharge, but whose home is located at a distance from the hospital;
• Provision of broadband access to allow for remote patient monitoring or other virtual care;
• Grocery or meal delivery services;
• Exercise or fitness equipment and virtual exercise programs; and
• Incentives as part of mental health or recovery programs.

While the Patient Engagement Safe Harbor is limited to in-kind tools and support and generally prohibits the provision of cash or cash equivalents such as gift cards, in some circumstances, gift cards may be permissible. For example, gift cards that can be used like cash for any item or service are not permitted under the Safe Harbor. However, a gift card that is limited to certain items or services, such as a meal delivery service to address nutritional concerns or a ride-sharing service to address transportation issues would meet the in-kind requirement.

The OIG stated that the permitted tools and support list is not exhaustive and there may be other types of support that would fit within the Patient Engagement Safe Harbor. One purpose of the Safe Harbor is to provide flexibility for health care professionals to determine and recommend the tool or support that would best address a patient’s social determinants of health and to promote coordination and management of patient care. For example, while not enumerated by the OIG, home “smart” technology aimed at ensuring patient safety likely would fit within the Safe Harbor. Similarly, a smartphone or software that facilitates telehealth services may be protected by the Safe Harbor.

However, the Patient Engagement Safe Harbor does not protect all tools that could be used to support patients. For example, tools and support of a “routine nature” such as ongoing rent or utility payments are unlikely to meet the requirements that the tools and supports (1) be related to care coordination and management, (2) are recommended by a licensed practitioner, and (3) related to one of the identifiable health goals, and thus the payments would not be protected under the Safe Harbor.

The Patient Engagement Safe Harbor, like the Care Coordination Harbor, excludes entities like pharmaceutical manufacturers, PBMs, and laboratories, from participating in VBE arrangements and thus using the Safe Harbor. However, the Safe Harbor permits device manufacturers and medical supply companies that are not physician-owned to provide tools and support as long as the tools and support are digital health technologies. Notably, this carve-out is more limited than the Care Coordination Safe Harbor carve-out as DMEPOS companies are excluded from participation, regardless of the type of tools or supports provided. Examples of digital health technologies that could be provided under the Patient Engagement Safe Harbor include:

• Scales and blood pressure monitors that are used for purposes of remote patient monitoring and which track and transmit data to a provider;
• Software or applications that allow a patient’s mobile device to monitor activity or other data; and
• Software or access to a platform that facilitates telehealth consults.

While the Safe Harbor requirements are not as stringent as the requirements for the value-based care safe harbors, the Patient Engagement Safe Harbor nevertheless has several enumerated requirements that must be met to fall within the protections of the Safe Harbor, including:

• The patient must be a member of the target population under the VBE (for example, the VBE could develop an initiative to make tools or support available to patients over the age of 65 with high blood pressure) and the target population cannot be defined by payor (all patients within the population must be eligible for the tools or support, regardless of payor), though the population can be defined by age;
• The tool or support is not funded or contributed by a party that is excluded from being a VBE participant and using the Safe Harbor, or by a VBE participant who is not a party to the arrangement;
• The VBE participant does not exchange or use the tools or supports to market other reimbursable items or services or for patient recruitment purposes (for example, advertising that patients may be eligible to receive a smartphone if they use a particular provider); and
• Maintaining records for at least 6 years that establish that the patient tool or support was distributed in accordance with the requirements of the Safe Harbor.

VBE participants interested in using the Patient Engagement Safe Harbor should:

• Ensure they have identified an appropriate target population of patients who are eligible for the tools and support;
• Confirm the tools and support being provided are tied to patient care coordination and management and will help the patients achieve an identifiable health goal; and
• Ensure they are maintaining adequate records to reflect compliance with the Safe Harbor, including records documenting the target population, how the tools and support are tied to patient care coordination, and the patients who actually receive the support as part of the target population.

Conclusion

These new Safe Harbors offer providers interested in instituting new value-based care programs, or expanding existing programs, additional protections when entering into innovative arrangements. However, the Safe Harbors are complex, and while failure to meet all requirements of a Safe Harbor does not automatically result in AKS liability, innovative arrangements that fail to meet the elements of the applicable Safe Harbor likely have a higher risk of enforcement due to the probable nexus between the remuneration and referrals. Providers seeking to avail themselves of a Safe Harbor’s protections should ensure they have sufficient processes in place to meet all of the Safe Harbor’s requirements, including both maintaining sufficient documentation and appropriately defining the target population of the value-based arrangement. Providers should also ensure that the party offering to provide support under the value-based arrangement is permitted to do so under the applicable Safe Harbor.